Foreign workers' tax blow

Date: May 8 2012

Daniel Flitton

FOREIGN workers in Australia stand to be punished under tax changes in the federal budget at the same time as the government is striving to attract more overseas labour to meet regional skills shortages.

In changes expected to reduce the salaries of thousands of foreign workers already here, the government is planning to cut tax breaks that allow people living away from home to deduct rental and food expenses.

The government has billed the changes as an attempt to stamp out rorts by highly paid senior executives and said local fly-in, fly-out workers in the mining sector will be exempt. But the impact will be keenly felt by those on temporary 457 visas who have accepted jobs in Australia with the expectation of tax relief.

Some foreign workers fear a $20,000 hit for those recruited to a wage of about $130,000.

The mining industry has warned the expected changes will damage its ability to attract skilled workers from overseas, although the impact is expected to be felt across the economy.

Jim O'Brien was recruited from New York to a fund-raising job at the University of Sydney due to his specialised skills in the philanthropic sector. He said the changes could affect his ability to keep working in Australia.

Despite flagging the changes will take effect on July 1, the government is yet to explain whether transitional arrangements will be made for skilled workers already in Australia.

''I'd love to get a little bit of clarity so I can make plans,'' Mr O'Brien said.

''I accepted a job based on an agreement to be paid a certain amount and the proposed changes potentially represent a dramatic change in that basic agreement.''

The Immigration Department has advised temporary foreign workers it is up to them to renegotiate the terms of their employment with their sponsor.